U.S. same-store sales for Domino’s Pizza dipped by 0.6% in the third quarter of 2023, while worldwide same-store sales grew 3.3%, the chain reported. All in all, the Q3 report signaled good times ahead on a global scale as well as challenges to overcome at home.

“Without adjusting for the impact of foreign currency, but excluding the closure of the Russia market, global retail sales grew 5.3% in the third quarter of 2023,” according to a Domino’s press release. (Domino’s closed all of its stores in Russia earlier this year after its master franchisee there announced plans to file for bankruptcy.)

But Domino’s U.S. same-store sales have been up and down for most of 2023. This year’s second quarter saw growth in same-store sales of just 0.1%, although the company logged a more impressive 3.6% growth in same-stores sales in Q1. Things are still looking up from early 2022, when Domino’s posted same-store sales declines in the first and second quarters, followed by 2% growth in the third quarter and 0.9% growth in Q4 of 2022.

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Stressing the positive in an October 13 earnings call, Domino’s CEO Russell Weiner noted that the chain has brought its delivery times back to pre-pandemic levels using best practices from successful franchisees. “We want these experiences to lead to loyal and lasting customers who will provide considerable lifetime value for our brand and our company,” Weiner said.

Meanwhile, Weiner pointed to two initiatives that are expected to drive sales growth through the remainder of 2023 and into 2024: the new and improved Domino’s Rewards, the brand’s loyalty program, and a partnership with Uber Eats that will extend to all stores nationwide by the end of this year.

With the new loyalty program, Weiner said Domino’s customers will need to spend less money to earn points and free food, down from $10 to $5. “This change will make us even more competitive in the carryout segment where tickets tend to be lower,” he said. “Our second change was creating more attainable redemption opportunities for lower-frequency customers. In the past, they needed to order six times to get a free pizza. Our new program features redemptions at 20, 40 and 50 points and offers items from eight different categories on our expansive menu. [We’re offering] more items to choose from with redemption options after just two purchases.”

This is a photo of just the Pepperoni-Stuffed Cheesy Bread

Free Pepperoni-Stuffed Cheesy Bread is now easier to get through Domino’s Rewards.

For example, 60 points can earn the customer a free oven-baked sandwich or pasta dish, while 40 points garner free Bread Twists or Stuffed Cheesy Breads and 20 points will earn single-serve beverages, Parmesan Bread Bites or dipping cups.

“We’ve seen meaningful redemption at the 20-point and 40-point level, so customers are clearly engaging more with Domino’s Rewards,” Weiner said. “These strategic improvements will be a significant value driver for our brand and company.”

Domino’s latest marketing move, offering free “emergency pizza,” has generated media coverage nationwide and boosted brand awareness. With a digital carryout order of at least $7.99 and membership in the Domino’s Rewards program, customers can get a free medium two-topping pizza at any time within 30 days.

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“It’s great to see a product and technology innovation work so well together,” Weiner said. “This is an example of the kind of purposeful innovation I’ve talked about in the past, innovation that serves many functions. In this case, you’ve got a new product that makes an existing platform top of mind with customers, all the while encouraging customers to sign up for and continue to take advantage of our improved rewards program—more customers, more orders and more market share, all leading to more top-line growth and greater profit.”

Third-party delivery through Uber Eats—a strategy that Domino’s resisted for several years even as their leading rivals embraced it—will also push sales upward in the coming months, Weiner believes.

“Our integration into the Uber Eats platform is proceeding as planned,” he told investors in the earnings call. “We’ll achieve our goal of Uber Eats providing delivery orders to all our U.S. stores by the end of the year. We expect this initiative will drive incremental delivery volume from new customers, increase our share of the pizza delivery market and create stronger economics for our company and franchisees.”

Weiner also alluded briefly to Domino’s recently announced collaboration with Microsoft to harness the power of AI and cloud computing technology. But he didn’t divulge any details beyond what was already revealed in a press release earlier this month.

“Together our teams are focused on two important goals,” Weiner said of the AI initiative. “First, transforming customer experiences by enhancing the ordering process through personalization and simplification, and, second, streamlining operations and quality control with more predictive tools. I couldn’t be more excited to work with Microsoft on this critical endeavor.”

When pressed by a caller to elaborate on Domino’s AI plans and how AI might affect Domino’s technology costs, Weiner added, “There is gonna be a competitive point of difference with generative AI solutions. We’ve got the resources and pizza expertise internally. What we’ve got with Microsoft is the best in the field externally. Take those two things together, [and] it’s not just cost, it’s also impact. If we could pick anyone to do it with, we would pick Microsoft.”

Additionally, profitability for Domino’s franchisees is up, Weiner said. “Despite our predicted…softness in our U.S. same-store sales, our operating income margin improved, as did our estimated franchisee profitability for the year. What that means is that the sales improvements we expect to realize in Q4—and even more significantly in 2024—will flow through a more efficient model for Domino’s and our investors. I’m confident about our future, including the more immediate future, here at Domino’s.”

CFO Sandeep Reddy sounded a similarly optimistic note, telling Domino’s investors, “We are on track to deliver average franchisee store profitability of at least $155,000 in 2023, up from the $150,000 we indicated on our last call.”

Pizza News, Domino's